1.3400 area: British Pound holds steady on BoE rate hike expectations

• 1.3390: GBP/USD trades little changed in Monday’s Asian session.
• A November BoE increase in Bank Rate to 4.0% is heavily priced into markets.
• Thursday’s BoE rate announcement comes into focus before US employment figures.

GBP/USD is steady near 1.3390. During Monday’s Asian session, traders remain on the sidelines before this week’s major events. Thursday brings the Bank of England (BoE) interest rate announcement, followed on Friday by US employment figures for October.

A rise in Bank Rate from 3.75% to 4.0% is expected at Thursday’s November policy meeting, according to economists surveyed by Reuters. It would mark the BoE’s first increase since August 2023, when inflation remained above its 2% target. Expectations of a hawkish BoE could lend support to the British Pound (GBP) versus the US Dollar (USD).

Alexander Harvey, UK economist at consultancy Oxford Economics, said: "While we don't expect a clear steer from the Committee on how many hikes they're planning, it's possible that the meeting minutes or Bailey ... signal that Bank Rate is unlikely to reach the level that is priced in by financial markets,"

Alongside the US midterm elections, this week’s employment report will draw close scrutiny. September Nonfarm Payrolls (NFP) are forecast to increase by 65,000, with the Unemployment Rate expected to remain at 4.2% for the same period. Evidence of a stronger US labour market could bolster the Greenback, putting near-term pressure on GBP/USD.

GBP upside faces higher hurdle with BoE tightening priced in

The latest UK Budget is viewed as an important stabilising influence by OCBC strategists, who say the Pound has “held up better than expected despite the fiscal strain from higher energy costs,”. In their assessment, the Budget “avoided adding to those concerns,” because it “stayed within the fiscal rules and preserved GBP15bn of headroom against the stability rule, even after absorbing some of the impact from the Middle East conflict.”

For OCBC, the wider UK environment “remains relatively supportive.” The bank notes that growth has “proved resilient,” and that the OBR has raised its “2026 growth forecast to 1.2%.” The strategists argue that “greater political stability and fiscal discipline should continue to offer GBP some relative support,” adding that “closer UK-EU economic ties could provide an additional medium-term tailwind.”

Further gains may be harder to secure, however, with OCBC warning that “the easy gains may be behind us.” Markets, the bank notes, are “already pricing an aggressive Bank of England tightening cycle, with a November hike heavily discounted and substantially more tightening priced into 2027.” Given “plenty of tightening already in the price,” its conclusion is that “the bar for the next leg higher in GBP is getting increasingly high.”

GBP rate-cut expectations constrained by Greene’s wage warning

A 7.4/10 score on FXS Speechtracker puts BoE’s Greene exactly at Greene’s historical average, indicating a persistently hawkish tone rather than a further shift. Wage disinflation, Greene stresses, has stalled above levels consistent with 2% inflation. Combined with the view that policy should act proactively against second-round inflation risks, this favours keeping UK interest rates higher for longer and offers modest support to GBP.

Despite forward-looking indicators pointing to pay growth nearer 3.5% and unexpected economic resilience, Greene sees a greater risk of second-round effects than previously assessed. This suggests little appetite for easing in the near term. The suggestion that labour market slack may already have peaked highlights the risk of renewed wage pressure. Overall, the speech signals a steady-to-hawkish position, curbing expectations of aggressive BOE rate cuts and supporting GBP against its peers.

Technical Analysis: GBP/USD retains modest near-term upside bias

Trading above both the 100-day simple moving average (SMA) and the Bollinger Bands’ middle SMA, GBP/USD retains a slightly bullish short-term outlook on the daily chart. The upper Bollinger band remains above the price, leaving scope for additional gains. Meanwhile, a Relative Strength Index (14) reading near 56 points to a constructive backdrop without signalling overbought conditions.

The upper Bollinger band around 1.3450 marks the first resistance level, where the recent advance could encounter selling interest. Initial downside support lies at the 100-day SMA of 1.3385. Below that, the middle Bollinger band at 1.3310 provides the next support, while an extended correction would bring the lower band near 1.3175 into view as a deeper cushion.

(The technical analysis of this story was written with the help of an AI tool. Know more.)